The term, Internet of Things (IoT) is something we see in virtually every business article attached to inflated adjectives that will make any executive’s head spin. And while some of this conversation is hyperbole, restaurant and bar owners would be remiss to ignore the trends. When used effectively and if implemented along a clear roadmap, the IoT and advanced analytics can drive significant, sustained growth of the bottom-line for restaurant owners.
The Internet of Things is transforming the hospitality business throughout the value chain.
Simply put, IoT is the connection of everyday physical objects to the Internet in order to gather real-time data about performance, operational effectiveness, malfunctions, etc. With the improvement of sensor technology, IoT adoption has become rampant in almost every industry, including insurance, advanced manufacturing, energy, and medical devices to name a few. The restaurant business – an industry in which operational precision, inventory management of both food and beverage, and quality assurance are of utmost importance – is ripe for disruption and is already being impacted by IoT innovation. With precise flow meter and sensor technology such as WeissBeerger’s Beverage Analytics™ Hub, beverage companies are now able to track sell-out (total beer consumed in on-premise outlets) of draught beer and fountain soda in real-time to enable more informed decision making around brand mix, pricing, promotion effectiveness, quality and more.
Understanding the value of big data for your industry and more importantly, for your unique business, can be a daunting task. The key is to follow a defined roadmap that suits your company's capabilities and needs. The IoT roadmap can be broken down into four stages and, if followed with organization-specific intent, can reap countless short and long-term benefits for any company.
Defining Current Capabilities and Data Goals
The first step for any organization is to define its most pressing business issues and to consider how access to data can help solve the problem or make more informed decisions.
For a restaurant, this can be anything from more effective staff management, to reducing draught beer waste, to accurately tracking point of sale activity and receipts. All of this is possible with the right IoT technology, but it’s important to identify what your priorities are as a business before making substantial investments.
Start with Descriptive Monitoring
Descriptive analytics are the first step to becoming a data-driven organization. This usually comes in the form of monitoring past performance with bar charts, line graphs and alerts based on predefined thresholds.
A typical example of descriptive analytics for a restaurant is monitoring consumption of soda from the fountain in real-time. By doing this, a business can better understand brand popularity at different times of day and maximize the brand-mix based on actual consumption trends. This information can help you make more informed decisions about wholesale product ordering or promotion timing. With a comprehensive IoT platform, you can set up an alert to be notified when waste exceeds a certain amount, consumption trends change, or a brand is out of stock.
This type of real-time specificity related to drinking patterns and consumer preferences can drive significant change for any outlet, but is limited in its ability to recommend how to fix an issue or, better yet, prevent the issue from occurring in the first place. For that, we will need predictive analytics.
Change Behavior with Predictive Monitoring
Predictive analytics is the next step in the IoT roadmap and is defined as taking historical performance or trends and applying advanced analytics to make predictions about an unknown future. This kind of analysis is perhaps the most beneficial for a restaurant and can be achieved with relative simplicity using current IoT tools.
Currently, forecasting draught beer and soda fountain consumption is very difficult and based primarily on total weekly or monthly sales. Forecast vs. Sales reporting is low quality, with accuracy levels estimated at 65-80 percent. This results in many restaurants either over-ordering or running out of stock on the most popular brands. By coupling real-time sell-out data with advanced ordering algorithms, restaurants can more precisely control their supply chain. With the right IoT investment, restaurants can expect forecasting accuracy to increase by up to 20 percent, ultimately translating into increased sales via reduced out of stock instances and improved working capital management.
Predictive modeling can help restaurant owners prevent issues and operate more efficiently, but to reap the full benefits of big data and IoT, owners should begin to automate complex decision making based on real data, which is the final step in the IoT roadmap.
Aspire to Prescriptive Analytics to Drive Decision Making
‘Prescriptive Analytics’ is defined as making automated decisions or recommendations based on a number of data inputs and assumptions. Utilizing this kind of advanced analytics correctly can drive substantial beverage sales and operational benefits and is already widely used in several industries. For example, large-scale utilities can make informed decisions about capital investments based on real-time energy demand and projections about population growth and urban planning. With IoT technology, executives can be more confident about their decision making and planning.
For a restaurant owner, prescriptive analytics can be used to run more effective promotions, offer dynamic pricing, and optimize brand and product offerings. By offering promotions on the right products at specific times of day or week, the restaurant owner can optimize beverage sales opportunities, maximize their return and increase incremental revenue by upwards of 40 percent. Pricing recommendations can be made per product for a specific time period to increase consumption during slow hours and maximize revenue during your busiest times. With the right IoT investments, you can stay ahead of market trends to always ensure you carry the right products at the right price and never run out of inventory.
The Internet of Things is transforming the hospitality business throughout the value chain, from the tracking of past consumption and consumer preferences, to making specific recommendations about pricing, promotions and product ordering. The IoT roadmap can be daunting, but following a specific path that fits your company needs can unlock a wealth of benefits that will transform your business giving you a real competitive advantage in the marketplace.